MiddletownWater & Sewer Committee

Recommendations for Future Financing of Improvements

Water & Sewer Committee Members:

Jennifer Falcinelli, Chairman

Mark Carney

Daphne Gabb

David Lake

Bob Smart

Scott Bolcik

Richard Gallagher

History of Improvements Funding

Town established the Capital Improvements Program in 1996. Primary purpose was to plan for major infrastructure

improvements and financing of those improvements. Prior to 1996, all improvement fees and operating fees were

combined in the operations fund and expensed each year. The only source of funding in the early CIP’s was growth dollars

(Tap fees). Starting in 1998, the Town began leasing space on the water tank

to cell phone companies to provide an additional source of revenue.

In 1999, the Town established the Debt Service Fee for new homes.

Future Grant & Loan Opportunities

Grants Based on the criteria

established by MDE for grant eligibility, i.e. 60% of State Median Income, Middletown will not likely received any substantial grants for future improvements and maintenance of the water and sewer system.

Loans Town is eligible for numerous

types of tax exempt loans. These loan are typically 2%-3% below prime with fixed rates.

Town has the ability to issue its own bonds for raising capital.

New Philosophy for the CIP Budget

Growth will pay for growth projects System users will pay for system improvement

projects

Goals of Water & Sewer Committee

Short-term Goals Fund existing debt without

dependence upon growth dollars (tap fees)

Refinance an existing loan to a lower interest rate.

New growth projects paid by growth dollars (tap fees)

Amend Operating & CIP Budgets to move 2 system improvement loans from CIP to Operating Budget

Establish a Capital Improvement Fee

Long-term Goals Ensure funding is available for

needed improvements without dependence upon growth dollars (tap fees)

System improvement projects paid by system users via Capital Improvement Fee

Replacement of waterline on Main Street

Short Term Goal:Fund existing debt without dependence upon growth dollars (tap fees)

In a depressed economy, cannot depend upon new home sales (tap fees) to fund debt

Limited water supply/allocation limits tap fees

Short Term GoalRefinance an existing loan to a lower interest rate.

Existing FHA Loan

Remaining Principal 344,248.96$ Interest Rate 5.00%Yearly Payment 39,946.00$ Term Remaining 12 Years

Refinanced Loan Thru DHCD

Prinicipal 344,248.96$ Interest Rate 3.85%Yearly Payment 24,825.89$ Term 20 Years

Overall Additional Cost to Refinance Loan

39,102.30$

Yearly Debt Service Savings

15,120.11$

Short Term Goal:New growth projects paid by growth dollars (tap fees)

New growth projects must be developer funded and/or financed with tap fees.

Short Term Goal:Amend Operating & CIP Budgets to move 2 system improvement loans from CIP to Operating Budget

The future goal for the Operating Fund will be a zero surplus due to the implementation of a Capital Improvement Fee.

It is an industry standard that debt service is paid from the Operating Budget

Recommending moving the I&I Loan and the MDE waterline improvement loan

Our current Operating Fund surplus is $75,908.25. The payments for these loans are $80,876.06

The impact is minimal to the Operating Budget

Water & Sewer FundTotal Outstanding Debt

$3,337,810.02

Water Tank, $754,750.00 , 23%

East WWTP, $2,099,138.95 , 63%

I&I, $139,672.11 , 4%

Waterline Project (1980's), $344,248.96 , 10%

Water & Sewer FundHow the Debt Service is Currently Paid

Debt Service Fees $119,400.00

28%

Tank Leases $127,727.00

30%

Tap Fees (Growth) $100,395.01

24%

Operating Fund Contribution $75,908.25

18%*

Water & Sewer FundGoal for Payment of Debt Service

Debt Service Fee (Existing) $119,400.00

28%

Moving Loans to Operating Fund $80,876.06

19%

Tank Leases $127,727.00

30%

Reduction Due to Refinancing FHA Loan

$15,120.11 4%

Tap Fees (Growth) $- 0%

Capital Improvement Fee $80,307.09

19%

Calculations for Capital Improvement Fee

Changes to CIP Funding Current Proposed Change

Debt Service Fee (Existing) 119,400.00$ 119,400.00$ Moving Loans to Operating Fund -$ 80,876.06$ Operating Fund Contribution 75,908.25$ -$ Tank Leases 127,727.00$ 127,727.00$ Reduction Due to Refinancing FHA Loan -$ 15,120.11$ Tap Fees (Growth) 100,395.01$ -$ Capital Improvement Fee -$ 80,307.09$

423,430.26$ 423,430.26$

Capital Improvement Fee 80,307.09$ Account Not Paying Debt Service Fee 930

Yearly Total Capital Improvement Fee 86.35$ Quarterly Cost 21.59$

Recommendation

Refinance the FHA Loan for a Longer Term and lower interest rate to Lower Yearly Debt Service

Move the MDE I&I Loan and FHA Loan back into the Operating Fund

Establish a Capital Improvement Fee on all Accounts that are not currently paying a Debt Service Fee

Debt Service Fee

In 2020 system users paying the Debt Service Fee will begin paying the prevailing Capital Improvement Fee.

Timeline for Implementation

October 2009 - Presentation of issues to public November 2009 - Introduction of Ordinance to

establish Capital Improvements Fee in December 2009 - Adoption of Ordinance for

Capital Improvements Fee April 2010 – First Water & Sewer Bill which will

include the Capital Improvement Fee